Discounts don’t cut it for everyone

Do you dare to discount? Talking to businesses this week, it emerged that one of the key things for them is their pricing strategy.

Do you dare to discount? Talking to businesses this week, it emerged that one of the key things for them is their pricing strategy.

No one wants to be caught in the damaging downward spiral of deep discounting, but maintaining full price when all around you are slashing theirs is extremely difficult and can lead to dwindling footfall.

In all honesty, after four years of the downturn, those who did rely on short-term price strategies are falling by the wayside, but the remaining operators, via a Darwinian process of evolution, have come out fighting.

This is not to say that every business has the same strategy. Some, like Next and Selfridges, have built consumer trust to the point where they can almost maintain a two Sale year; others plan regular Sales, like Debenhams; and yet more, like Marks & Spencer, are using strategic Sales to shift particular items, lines or categories, while avoiding looking like they are on constant Sale.

The common denominator here is that buyers’ budgets and overheads have been cut to size in advance, according to whatever strategy has been decided. And it is then crucial that the business holds its nerve and is not panicked by rivals’ actions.

Look out for our Next Generation supplement, which includes our 30 Under 30 list of rising stars as well as some exclusive insights from industry high flyers on how to make it big in fashion. Enjoy!

Online retail sales in the UK increased 8.1% year-on-year last month, the lowest November growth since 2011.

Readers' comments (8)

Anonymous19 January 2012 9:08 am

You use the terms 'deep discounting', 'intergrated promotional markdowns','strategic sales','knee-jerk price slashing' 'two sale year' as if they are all different things...they are not. In plain English, they are all exactly the same things; reductions in price to generate Sales. Some retailers do not have to do them as much as others.

Better retailers can afford them, poorer ones cannot. There is no magic from any of the retailers you mention and dressing this article up in 'Management speak' will not produce any!

Thanks for your comment, and I take your point. I think what I was trying to emphasise was not that any of the above is rocket science but that there has been a change in the way retailers view discounting. It is not a twice ayear thing now but something constant and buying has adapted to match that. The management speak is the terminology used by retailers reporting their strategies, but you're right, Drapers should cut through that and report in plain English! Regardless of the terminology I don't agree that all those things are the same. A flash Sale is very different strategically from a planned January Sale, for example, and the business strategy behind the two will have to be different too.
Caroline Nodder

Indeed one of the biggest culpit's here is Debenhams, there is no strategy to this, to put it simply retailers discount because they have to, Debenhams have spiralled downwards to the point where their customer simply does not trust the full price anymore as they know sooner or later they will discount, this so called strategy continues to damage not just the high street but their own image and the product, which it appears to now be bought to take this into promo's into account.In the current climate the only course of action for any retailer should be value and this is not just about price but offering product the customer see's as a must have, sadly very few retailers have the confidence or know how as to carry this off and instead still go for the mundane.

I do not agree that 'most operators have learnt a lot over the last two years' and I also do not agree with your reply that through a Darwinian process, the ones left have come out fighting. The ones left are simply bigger or better funded. Very few have any strategy at all and have most have Managements who lack simple common sense. Tesco -becoming hated by its customers, M&S- shadow of its formers self, Debenhams racked up with debt and continually on sale, Next-dull, over ranged with a poor strategy of opening shops into a declining market... I could go on!

Why don't your articles really provide us with some insightful comments or investigations into the real issues facing the industry and country? Domination and homogeneity by large players, use of predatory financing to gamble with Co's futures, abuse of pre-pack administrations to steal suppliers money, shops full of low cost and low quality 'tut' from China, Robotic and staff free retailing, celebrity led endorsements conning the public, and strangulation by legislative red-tape to name just a few.

I don't think its fair to say none of the retailers out there have any real strategy - and I do think lessons have been learned. And are continuing to be learned. Not by everyone of course, and some of the best operations and ideas or innovations at the moment are not on the high street.
In terms of how Drapers covers the sector thank you for your feedback. This type of in-depth report, looking at topics like those you mention is exactly where I see Drapers can add value for its readers and hopefully you will see us tackling many of these subjects over the coming year.
In my brief comment pieces I can only scratch the surface but the aim is to start a discussion very much like this one to help broaden the view.
Caroline Nodder

But how do smaller or independent retailers possibly compete? Be it long or short term strategy, discounting is happening and it puts pressure on all retailers to follow suit - it's what customers now expect. Larger operations are, in the main, able to cope with discounting - their economies of scale, buying power, larger funds etc etc. Smaller retailers, not so much.
I see the point that you have to have the confidence or know-how to put alternative (non-price) strategies in place. But surely this is more easily attainable for larger, established retailers who have constant press, a huge customer base and also an international following.
What if you are a small retailer who is trying to build its brand and get to a place where it can secure a big enough customer base so that pricing isnt the only deciding factor in a purchase??
At the moment, we get sales if we discount 20%, we don't get the same sales if we dont. And as much as I hate to say it, if we want to survive, I can't see an alternative route.
You may say, it's the product that's at fault but I genuinely don't think it is. It's consumer's attitudes - they'll hold off buying as they know a discount is around the corner.

There are so many issues here, but for me they all boil down to one thing - the clothing trade generally isn't run well. You see big companies and brands make mistake after mistake that even the most junior member of staff could foresee. And the sad thing is, it's getting worse.

We need less product, less outlets, less image obsessed brands and media, less sale periods, less clueless middle management who have no retail experience. This list is endless. The number of times you will see an article with a brand or retailer and there is gushing, even sickening praise. Get down to the sharp end of things and that retailer or brand isn't making any money or a loss. Therefore they have failed. A business has to make profits or there is no point of its existence.

Give the customers what they want, then unnecessary sale periods would be a thing of the past. Somehow I feel that it never going to happen..

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